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State fiscal conditions continued to improve in 2012, although many state budgets have not recovered to prerecession levels. Revenues from corporate income taxes remain down nearly 25 percent over 2008 levels when adjusted for inflation. Between 2008 and 2012, three states—Illinois, Oregon and West Virginia—raised corporate income tax rates, while five states— Kentucky, New York, North Dakota, Massachusetts and Maryland—lowered rates. During this same time period, states had to rely less on corporate income taxes in their general fund budgets; revenue from those taxes are estimated to make up about 6.4 percent of general fund revenue in 2012, lower than the 7.6 percent they comprised in 2008.

State revenue collections in the 2011 fiscal year grew by 6.4 percent and state general fund spending increased by 4 percent following two straight years of decline. The 2011 tax revenues are just $26.6 billion under the peak reached in 2008 and are just shy of the 2007 collections. Meanwhile, the challenges facing states in many programs continue to grow. State spending on Medicaid programs, for instance, is expected to increase nearly 50 percent from 2010 to 2012. Those are just a few examples of information and data found in the 2012 edition of The Book of the States, The Council of State Governments’ annual almanac of information about the states.

Ensuring students are academically prepared for postsecondary education was the spark leading the National Governors Association and Council of Chief State School Officers in 2005 to push for a consistent, clear understanding of what students are expected to learn—known as the common core state standards. Because states historically have set their own academic standards, the nation has been faced with a patchwork of academic expectations. The knowledge and skills in reading, writing and math that a student was expected to have at each grade level in one state could be significantly different from those in another. This inconsistency of standards became a serious problem whenever a family moved from one state to another. Students could easily be forced to repeat material they had already learned or, even worse, face a learning gap in which they had not yet learned material that had already been covered in the state to which their families moved.

Hydraulic fracturing and horizontal drilling have created new domestic energy frontiers and made the United States a net energy exporter for the first time in more than 60 years. Although the process has been used for decades to stimulate production from declining wells, new technological advancements have rapidly accelerated the development of unconventional reserves of fossil fuels that were either unknown or considered uneconomic just a few years ago. Despite the excitement over the potential economic benefits are underlying public safety and environmental concerns.

Almost 60 years of federal record-keeping passed before this country reached its highest number of major disaster declarations, 81 in 2010. It took only one more year to shatter that record, with 99 in 2011. State emergency management handled the growing number of events even as the average operating budget slid for the second year in a row. While Congressional scrutiny over federal spending persisted in Washington, D.C., state emergency management showed the initiative and proposed a substantial restructuring of related federal grants, one that promotes flexibility and accountability. The backdrop to all of this is national elections, which can turn every issue—including better preparation for the next disaster in order to save lives and protect property—into a political football.

Medicaid is the stuff of nightmares for state budgeters. With the Great Recession, Medicaid enrollment expanded as unemployment increased. Overall health care costs also continued to swell, although recent data indicate that the health spending growth rate may have slowed somewhat. The American Recovery and Reinvestment Act of 2009 provided an enhanced federal matching rate for state Medicaid programs in recognition of the counter-cyclical nature of the program—just when state revenues contract, the demand for more spending in Medicaid increases. The enhanced Medicaid matching rates ended during the 2011 fiscal year and states face difficult budget decisions that pit Medicaid against other state policy priorities.

A high-performing system of long-term care services and supports must address four critical dimensions: affordability/access; choice of setting/provider; quality of life and care; and support for family caregivers. A recent scorecard assessed the states on 25 indicators within these dimensions and found marked differences in performance. States can use these findings to target system improvements.

The challenges facing today’s Medicaid program are more significant than at any time in the program’s history. Medicaid directors are struggling to finance the current health care safety net while simultaneously attempting to drive significant reforms in the broader health care system. To better assist them, the National Association of Medicaid Directors was created to serve and represent them in their efforts to guide the program through an uncertain future.

Individuals released from prison and jail and who are on community supervision have complex needs. If those needs are not met, the likelihood of their successful transition to the community is reduced, which can pose a threat to public safety. Despite the fiscal challenges many state governments have faced in recent years, policymakers and community stakeholders are increasingly aware that, in many cases, the cycle of reoffending can be broken if the right tools and approaches are used. With continued federal support and strong state and local leadership, the chance for meaningful and lasting change is within reach.

Many states face an ever-widening chasm between how much they have available to spend on transportation infrastructure and how much it actually costs to maintain and improve that infrastructure. There are numerous reasons for this, including the decline of existing revenue sources due to increased fuel efficiency, inflation and other factors. Absent a consensus on how to move forward, a number of states in 2011 turned to transportation funding task forces and blue ribbon commissions, diverse groups of stakeholders charged with making recommendations as to how these states could come up with the needed funds to meet their infrastructure needs in the years ahead. While their recommendations aren’t always heeded immediately by policymakers, task forces and commissions can play an important role during a time of tough decisions and political divisions.